The Commodity Futures Trading Commission (CFTC) said in a statement released on Monday that Mosaic Exchange and the company’s chief executive, Sean Michael, have been barred from engaging in fraud and ordered to pay over $1.1m in penalties following an international scheme involving digital asset trading.
The ruling comes after the final default judgments of the US District Court for the Southern District of Florida, due to a CFTC complaint filed in September 2023, which ended on December 23 and 30, 2024. Liquidity Acceptance is related to the decision by the court that saw them convicted of engaging in the deceptive solicitation and the embezzlement of customers’ funds, thus violating the Commodity Exchange Act (CEA).
Mosaic Exchange Ltd. and CEO Ordered to Pay Over $1.1 Million for Fraudulent Digital Asset Commodity Scheme: https://t.co/6U3yPBg4ms
— CFTC (@CFTC) January 13, 2025
Permanent Ban on CFTC Market Activities for Defendants
As a part of the judgment, the defendants have been ordered to pay restitution, forfeit the amount earned by violating the order, or pay civil penalties. The CFTC stated:
The default judgment order requires them to pay jointly and severally approximately $468,600 in restitution, $60,980 in disgorgement, and a $660,000 civil monetary penalty.
Also, the court order permanently enjoins Mosaic and Michael from registering with the Commodity Futures Trading Commission and engaging in any activities in any CFTC-regulated markets. The ruling also restrains them from performing any act that would be in violation of CEA.
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The securities frauds took place between February 2019 and June 2021 when the defendants requested money from 18 consumers while lying about profit margins, assets operated by the company, and collaborations with exchange platforms. It was established that Mosaic provided a false performance to the management, and Michael embezzled customers’ money for personal needs related to traveling and food expenses.
CFTC Reaffirms Commitment to Investor Protection
The CFTC has recently reaffirmed its assurances of investors being protected from fraud schemes or scams. To this end the agency recommends that those interested in investing should confirm the registration status of any firm through the National Futures Association list and should report any suspicious activity through the Commodity Futures Trading Commission Hotline or through the CFTC whistleblower program which offers the whistle-blower a percentage of the fines that results once the information given leads to enforcement action.
The regulator also noted the increasing incidence of fraud involving the unregistered firms to offer investment in the commodity pool and encouraged the public to exercise accordingly. This case once again proves that the Commodity Futures Trading Commission continues to work in the fight for misrepresentation and misconduct in the present and emerging financial investment, specifically in the digital asset industry, to protect investors.
Conclusion
The CFTC restated its commitment to providing a safe investment environment to the community and encouraged the people to check for registrations in the National Futures Association database and report any fraudulent activities to the Commodity Futures Trading Commission hotline or whistleblower program. As it pointed out to increased instances of fraud experienced by clients involving unregistered firms, the agency urged the public to be cautious in the emerging digital asset space.
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FAQs
- What penalties did Mosaic Exchange and Sean Michael face?
They were fined over $1.1 million, including restitution, disgorgement, and civil penalties, and were permanently banned from CFTC-regulated markets. - What fraudulent actions were they accused of?
They made false claims to 18 customers and misused funds for personal expenses between 2019 and 2021. - How can investors avoid fraud?
Verify firm registration via the National Futures Association and report suspicious activities to the Commodity Futures Trading Commission. - What is the CFTC doing to prevent fraud?
The CFTC monitors misconduct in digital assets and prosecutes fraudulent schemes while educating the public.
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